The procedure for buying a property in France is reasonably straightforward and well regulated. In general the steps are as follows.
1. The buyer makes an offer that is accepted.
If you are buying through an agent, they will usually inform you by phone or email. It will be up to the seller to ensure that all the necessary diagnostics are completed.
2. The parties choose their “Notaire”.
A “notaire” is a legal expert appointed by the Justice Minister and acts on behalf of the State in order to draw up authenticated contracts on behalf of the buyer and the seller. The seller can also choose their own notaire if they wish, so in some cases, there can be more than one notaire.
A notaire is under a legal obligation to provide the buyer with complete information on the nature and the content of the signed agreement and its consequences. Their main role is to secure the transaction, to ensure a non-disputable title of ownership and to collect all taxes due to the State.
What are the notaire’s fees?
The amount paid depends on the age and price of the property.
- Existing Property – between 7% and 10% of the purchase price, excluding estate agency fees.
- Recent/New Property Developments – 2% in conveyancing fees and registration taxes, plus VAT at the rate of 20% on the purchase price (except for sales between private individuals), excluding estate agency fees. The notaire only receives approximately 1% of the property sale price. The remaining amount goes to the government to pay stamp duty and registration tax disbursements.
The notaire’s fees are paid by the buyer. If there is more than one notaire, the cost to the buyer is still the same and that amount is split 50/50 between the two notaries.
Note: The notaire costs do not take into consideration the cost of a mortgage or setting up a company if that’s how you intend to purchase the property.
3. Preliminary Contract “Compromis de Vente” is signed
This is drawn up by the notaire once they receive the following paperwork from the seller:
- Title of ownership
- Confirmation that the building conforms to all legal regulations
- Report on asbestos, electrical wiring, natural risks, etc. This is also known as the diagnostics.
This contract includes all the conditions of the sale and specifies a completion date. The contract is subject to conditions which, if not met, can annul the purchase:
- Justification that the property belongs to the seller in question and that there are no impediments to him or her selling it.
- Refusal by the Town Hall based on its right to pre-empt the sale.
- Any suspensive conditions, for example:
- The buyer getting a bank loan at a preferred rate
- The buyer selling their own home first
- Planning permission to make structural changes to the house/land
- Anything else agreed between the buyer and seller
4. The Deposit is paid by the buyer
When the buyer and seller have agreed on the price and the preliminary contract has been signed, the buyer has to transfer a deposit of between 5 and 10% of the agreed property price to the notaire. This sum will be held in an escrow account until the final transaction.
The transfer is done by bank transfer.
5. 10 Day Cooling Off Period For the Buyer
The buyer benefits from a mandatory 10 day cooling-off-period after receiving a copy of the preliminary contract. The seller doesn’t benefit from this cooling-off-period; it only protects the buyer.
If the buyer decides to withdraw during this period, they must be refunded 100% of what they transferred into the escrow account. At this point the purchase process is terminated.
The buyer can change their mind for any reason and does not have to justify it in order to receive a full refund of the deposit during this ten day cooling off period.
What happens after the 10 day cooling off period?
Besides the conditions outlined in the Compromis de Vente, if the buyer decides they no longer want to proceed with the purchase after the cooling off period, the seller has the right to keep the deposit of up to 10% of the property sale price as compensation.
6. The Buyer Arranges The Finance
The buyer can decide whether they are going to make the purchase as an individual or as a company.
Trusts are not recognised in France. Often, if the buyer is the shareholder of a company in France or Monaco, the purchase is made through their company.
There are other more sophisticated payment structures which can be used with the help of a specialised lawyer.
If a bank loan is required, it will take up to two months to get a reply from a French bank. You will then have to wait a minimum of ten days to accept the offer. The bank’s offer remains valid for 30 days. You have to make use of the loan within four months of accepting it.
Mortgage rates in France are very competitive and are often fixed for the full term of the loan. Allow for a fee to the bank of around 1% of the loan total.
7. The Notaire Draws up the Final Deed “Acte Authentique de Vente”
When the other stages of the process have been completed and the notaire’s office has done all the required administrative checks, the final deed, which is called the “acte authentique de vente”, can be drawn up. There is generally a delay of three to four months between the signing of the preliminary contract and the final deed.
8. Final Deed is Signed by the Buyer and the Seller
This final deed is signed in the presence of all parties. The seller and the buyer meet with their respective notaries and the estate agent. The fine points of the sale terms and conditions are highlighted, then the documents are signed by both parties and witnessed by the notaire(s).
On the day the final deed is signed, the balance of the property price (90% to 95% depending on the deposit paid) must be paid through the notaire’s escrow account. Please allow for the necessary time for the money to be actually in the escrow account.
The buyer must pay fees which are generally 7% – 10% of the overall property price. This includes the notary fee of 1% on the total price, the purchase tax of roughly 5.89% on the price and the admin costs. If house contents are being purchased separately, this amount will not be subject to fees. However, contents will need to be itemised and included as part of the contract.
If a company is used to purchase the property, the buyer who signed the preliminary contract with their own name will substitute his/her company which means that the contract is free of any tax.
Once the signing is complete, keys will be exchanged and the buyer is now the legal owner of the property.
NB: The buyer will have to show an attestation from an insurance company to prove the property is insured in their name prior to completion. Also, the buyer should take readings from utilities on the morning of the signing or the day before and transfer the utilities into their name. A good property agent should assist in this process.
